09 September 2016 by lberuti
We have not had such a day for a while. It never felt like the end of the world, but today’s moves caught many off guard, especially the second leg which took place once the US came in and accounted for two third of the move wider in credit indices. We saw it coming though, as until mid-week, expectations of more QE from the ECB had been building in the financial sector, where the most dubious actions were mooted. The strong tone that we had seen until Thursday lunchtime eventually gave way to a 15bps correction for iTraxx Crossover and CDX HY, and a 3bps correction for iTraxx Main and CDX IG. That said, if this move was in sharp contrast to the recent period of ultra-low volatility, it only took us back to the levels at which credit indices closed a week ago. We will get some more Fed speeches early next week. We shall see then whether investors, who went sulking following Mr Draghi’s decision, go into a full-blown taper tantrum.